2016 (4) TMI 694 - AT - Wealth-tax

Validity of initiation of the proceedings u/s. 17 of W.T. Act - notice issued in the name of a non-existent amalgamating company - Held that - Notably, ACRL, which was visited with the notice u/s. 17 of the Act had since amalgamated with ACL on 1.6.2004 in terms of an amalgamation scheme sanctioned by the BIFR. It is a trite law that initiation of the proceedings for reopening of the assessment hinges upon the service of a valid notice in terms of Sec. 17 of the Act. Ostensibly, the notice issued to a person who is not in existence at the time of issuance of such notice renders such initiation invalid. In the present case, the fact that the amalgamated company, i.e. ACL, subsequently appeared in the proceedings cannot take away from the fact that the notice u/s. 17 of the Act was bad in law and such defect cannot be cured merely on account of the fact that the amalgamated company appeared subsequently. It is a well established position of law that the defect in the notice of reopening cannot be cured because it goes to the root of the jurisdiction to reopen the proceedings. - Decided in favour of assessee

Summary

Issues Involved:
Validity of initiation of assessment proceedings under section 17 of the Wealth Tax Act, 1957 due to notice served on a non-existent amalgamating company.

Detailed Analysis:

Issue 1: Validity of initiation of assessment proceedings under section 17 of the Act
- The appellant challenged the initiation of proceedings due to a notice served on a company that was not in existence at the relevant time.
- The company in question had amalgamated with another company before the notice was issued.
- The Assessing Officer relied on Sec. 42C of the Act to validate the notice, stating that any defect can be cured if the proceedings are in conformity with the Act's intent.
- The CIT(A) upheld the Assessing Officer's decision, pointing out that the amalgamated company participated in the proceedings and was responsible for the liabilities of the dissolved company.
- The appellant argued that the notice to a non-existent amalgamated company was invalid, citing a similar case upheld by the Calcutta High Court.
- The Departmental Representative defended the initiation of proceedings, stating that corrective steps were taken after realizing the amalgamation.
- The Tribunal agreed with the appellant, emphasizing that the notice issued to a non-existent company rendered the initiation invalid.
- Citing the Calcutta High Court's judgment, the Tribunal ruled in favor of the appellant, setting aside the reassessment proceedings solely on this ground.

Conclusion:
The Tribunal upheld the appellant's plea regarding the invalidity of the initiation of assessment proceedings under section 17 of the Act due to the notice served on a non-existent amalgamating company. The Tribunal's decision was based on the principle that the defect in the notice of reopening goes to the root of jurisdiction and cannot be cured, following the precedent set by the Calcutta High Court in a similar case. As a result, the appeal was allowed, and the reassessment proceedings were set aside.